Yes, you can buy a car if you have bad credit


But you may be better off waiting until you can raise your score

It’s hard enough to buy a car these days, but if you’ve got a low credit score the task is even more difficult.

Lenders set interest rates based on the buyer’s credit standing. A credit score of 740 or higher usually gets you the best rate. A not so good score will usually relegate a buyer to the subprime category, with double-digit interest rates.

Over the life of a five-year loan with a subprime interest rate the difference in what you pay is enormous. Someone with excellent credit might get a 2.96% interest rate with an $808 monthly payment. Over five years they’ll pay $3,480 in interest.

Someone with poor credit might get stuck with a 12.84% interest rate and a $1,021 monthly payment. At the end of five years they will  have paid over $16,000 in interest.

Eight tips

In a recent study, the ConsumerAffairs research team identified eight tips for buying a car with bad credit.

  • Delay the purchase until you can raise your credit score

  • Make a bigger down payment

  • Shop around for both the car and the financing

  • Limit your search to two weeks

  • Look for newer rather than older vehicles

  • Opt for a shorter term, even though it will increase the payment

  • Get pre-approved before shopping]

  • Find someone with good credit to co-sign your loan

How to raise your credit score

If you can delay the purchase by six months, that might be the best course of action. By proactively working to improve your credit standing you should be able to raise your credit score by several points.

First and foremost, pay every bill on time. This is especially true for credit card bills. Pay down the balances as much as possible since the difference between your credit limit and how much you owe is a big factor in determining your credit score.

You may be able to instantly add a few points by signing up for Experian Boost, a free program that reports on-time payments for regular bills like utilities, cell phones and streaming services to the credit bureaus.

Where you get your car loan can also make a difference. If you bank with a credit union, it will likely give you the lowest interest rate. Some car dealers will advertise they have financing plans for all types of credit scores, but borrowers with lower credit scores often get saddled with a very high interest rate.

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